original post from: bingfeng cafe
via: eswn, read the post here: The 'Malignant Tumor' in Chinese Book Publishing
this post gives us some basic background information about china's publishing business, and the last part, the one about the chinese workshops, is particularly interesting to me.
in theory, the publishing business is perhaps the most protected and monopolized among all media sectors in china. but in reality, it has become a competitive industry through the introduction of various "workshops" into the industry value chain. as indicated in the Ming Po article, this introduction was not initiated by the government. the publishing houses, which are established by the government and not allowed to be merged or purchased, are in the pressure of oversupply, just too many publishing houses for a too small market. that's why they come to ask help from those "workshops", a shortcut to cover their operating expenses and transfer market risks.
in the coming years, the government will open the industry from the downstreams like retailing and wholesaling, and gradually move upward to publishing, but be careful here, the publishing won't open up like the distribution. so far the government only hint that someday in the future, domestic and private money will be allowed to invest into those current existing publishing houses to participate into the publishing business. so basically the publishing and distribution will be two different scenarios - one is a controlled competition, the other, a pure competition.
now, what are the implications to industry players with (domestic) private and foreign descents? here are some of my thoughts.
1) the game rules for publishing and distribution are different. this should be the starting point when decide whether to enter and which areas to enter, and when develop the subsequent strategies. in my view, a lot of industry integration will occur in distribution, which favors those big guys with the access to a lot of money, except for a few niches, i think the prospects for domestic players in distribution are dismal. on the other hand, the publishing sector has become so depedent on those "workshops" that they in fact can not live without them. sooner or later the government will legitmize the domestic private players in publishing business.
2) distribution integration through M&A? i believe this is the plan in the minds of many wait-and-see foreign firms. there are many xinhua bookstores, without textbooks, they are already dead. there are some big on-line book sellers, i guess many of them didn't reach the break-even point. if there were an existing book club in china, very probably bertelsmann wouldn't do all the painful work to build up its own. but wait a moment, i doubt that is the right way to go. the current distribution network, if there are any, are very low efficient and poorly equipped, and their people, not an asset in any sense. location and all the "guanxi" established over years are perhaps the things that a new entrant want to get from existing ones, but not that important after a few year, i bet. so, why spend a lot of money to buy an existing distribution network if you can get the same (or even better) one without spending so much.
3) the current model of working with publishing houses will change, how? i don't know. but for those "workshops" who are satisfied with making money through good "guanxi", the situation will become uncontrollable when the government launches new policies or starts to integrate the publishing houses. in short, the business model of current "workshops" is not sustainable, they are just vulnerable to policy and "guanxi" risks. is becoming a part of the publishing house a good idea? hard to say, it depends on too many variables.
to be continued ...